The reformed Michigan no-fault law now offers drivers more choices, as well as changes to their auto insurance. While some of these changes will be phased in over time, most will go into effect on July 2, 2020. At Venture Insurance, we want to help our customers understand how their insurance coverage is affected.
What’s on the horizon for Michigan drivers
Previously, it was mandatory for drivers to carry unlimited Personal Injury Protection (PIP) benefits, but starting July 2, 2020, drivers will be able to choose from five different coverage options:
- Unlimited PIP coverage
- $500,000 limit
- $250,000 limit
- $50,000 limit; this is the lowest limit available, but only for drivers who are on Medicaid. (Your spouse and other relatives who live with you may be on Medicaid or have other qualified health coverage.)
- Opt-out of PIP coverage entirely; however, you, your spouse and all relatives who live with you must have Medicare or qualified health insurance to be eligible.
Additionally, these changes will also take effect July 2, 2020:
- Insurance companies must reduce PIP premium rates, and guarantee that they will be reduced for eight years. The rate reduction applies only to personal injury protection premiums, which is one part of your entire auto insurance costs. The average reduction takes into account both the PIP premium and Michigan Catastrophic Claims Association (MCCA) vehicle assessment fee, which cannot be reduced by insurance carriers. The reduced amount will depend on the PIP coverage that a driver selects – the higher the coverage, the lower the reduction. For example:
- Unlimited coverage would receive on average a 10% reduction
- $500,000 in coverage would reduce on average by 20%
- $250,000 in coverage would reduce on average by 35%
- $50,000 in coverage would reduce on average by 45%
- Individuals with Medicare or qualified health insurance could opt out and receive a 100% rate reduction on certain portions of PIP, depending on their individual circumstances. MCCA deficit fee would still apply ($0 for 2020 has been announced for MCCA).
- Non-driving factors can’t be used to set insurance rates. These factors include postal zone, credit scores, home ownership, education level and occupation.
- Minimum liability coverage limits will be increased from $20,000 per person and $40,000 per accident to $50,000/$100,000. The policy will default to $250,000/$500,000 (or $510,000 for commercial auto policies) if you do not make a choice. Drivers must sign a selection form to choose limits lower than $250,000/$500,000.
- Tort damages will also be recoverable for excess allowable expenses and work loss. And, the “Mini-Tort” damage cap will increase from $1,000 to $3,000 for accidents occurring after July 1, 2020.
- Policyholders will be given the option to select their PIP coverage at each renewal. If policyholders do not make a specific selection with their new policy or when their current policy renews after July 2, 2020, their policy will be issued or renewed at the default level of Unlimited coverage.
- The order of determining who will pay for a no-fault claim – called the “order of priority” – has changed in some cases involving:
- Relatives who do not reside in the household of the named insured unless they are away at school. These relatives (such as your children) would need to have their own insurance policy, even if they are driving a car you own.
- Non-relatives who reside in the household, even if they are listed drivers. They would need to have their own insurance policy.
Please contact us so we can help you review your policy and the option that works best for you!